Monday, April 21, 2008

German Government Ups It's Growth Forcecast For Q1 2008

The Finance Ministry have announced this morning that the German economy may have expanded at a stronger pace in the first three months of 2008 than was expected earlier. Sine they must already have some provisional data to hand this outcome now seems very likely. It should also come as no particular surprise to regular readers of this blog since we have been closely following industrial outputand export numbers and the pattern of resistance to the general downward movement globally has been clear enough.

However the Ministry also indicate that the economic data they have to hand suggest that growth will moderate in the course of this year. Again we concur, and suggest that the key data to watch moving forward are the rate of export growth and investment in machinery and equipment, once both of these start to fall back the deceleration will become much more pronounced.

"Economic growth forces still prevail,'' the Berlin-based ministry said today in its monthly report, citing ``favorable economic fundamental data, robust domestic demand, above-average capacity utilization as well as optimistic sentiment at companies.'' Still, economic risks such as rising oil prices, the euro's appreciation and a recession in the U.S. have increased, and slowing orders may be a sign of ``brake marks'' caused by less dynamic global growth, the ministry said.

The Ministry report is the second government study in four days to suggest that the German economy, which is still Europe's largest, may be hurt over time by cooling of world trade. The Economy Ministry said on April 18 that economic growth will likely moderate after an acceleration in the first quarter as the outlook for exports darkens "in the short term.''

The Ministry noted that sluggish consumer spending was a "concern" and it is reasonably clear that slowing exports - when this situation arrives - will not be compensated by higher internal demand.

German manufacturing orders unexpectedly fell for a third month in February, the Economy Ministry said April 4. Adjusted for seasonal swings and inflation, orders fell 0.5 percent.